Biotechnology Healthcare - July/August 2008 - (Page 42)

IMPACT ON PAYERS It is estimated that by 2020, 37 percent of total drug expenditures in the United States will be attributed to biologics (PCMA 2006). In one survey, 68 percent of managed care medical directors said they consider managing the cost of biologics a high priority (MedPanel 2006). Arguably, the greatest impact of the high costs of biologics is on uninsured or underinsured patients, especially senior citizens, who comprise approximately 50 percent of RA patients and often cannot afford to pay the entire out-of-pocket cost of RA medications. Even though Medicare now covers several biologics under Part D, copayments, deductibles, premiums, and the “doughnut hole” leave Medicare beneficiaries responsible for about half of their catastrophic medication costs. Changes in Medicare coverage have increased beneficiary access to medications, but, as expected, they also are leading to increased utilization and overall drug costs (Zhang 2008). If the rate of the rise in expenditures for biologics remains high, total costs for such drugs in 10 years may increase by a factor of nearly 20 — accounting for just under 30 percent of the projected Medicare Part D budget — according to Blue Cross Blue Shield data (Mullins 2005). IMPACT ON THE INDUSTRY Arguably, Medicare Part D may serve as one of the contributors to increased utilization of biologics in RA patients, as do the initiation of aggressive treatment earlier and for more patients. Sales of biologic agents grew 20 percent, to $40.3 billion, in 2006 — more than double the rate of traditional pharmaceutical agents (Walgreens 2007). RA was ranked as the number one therapeutic area for biologic sales by class in 2006, and etanercept (Enbrel) was ranked as the number one RA biologic by sales (Table 1, page 39). Biologics comprise approximately half of the current drugs in the pipeline, four of which are expected to gain their first FDA indications this year (Table 2, page 40). As the pipeline of traditional pharmaceuticals dries up, the future of new miracles in medicine lies in biotechnology. The enormous growth within the biologic industry will stem from the development of follow-on biologics, also known as biosimilars (Genazzani 2007). Biosimilars are not “generic” in the sense of being identical to brand-name biologics, but are similar enough to produce comparable results in patients (Mellstedt 2007). The main differences in the production of biosimilars, compared with traditional pharmaceutical generics, lie in their development and manufacturing methods, with the former being Figure much more complex and difficult to reproduce (Ranke 2008). Even a slight variation in the structure and properties of a biosimilar can cause near-fatal consequences for patients (Ranke 2008). Another challenge is in conducting comprehensive testing, which increases the costs involved in proving that the safety and efficacy of a biosimilar medication are comparable to the original branded version. It has been argued that the difficulty in proving biosimilarity will eliminate the majority of potential cost savings (Mellstedt 2007). Nonetheless, employers, third-party payers, and patients have expectations of significant savings, and it has been estimated that biosimilar drugs have the potential to reduce Medicare costs by $14 billion annually (Engel 2007). With a number of high-revenue drugs nearing patent expiration (Table 1), investment in research and development has steadily increased (Figure). Research and development in biologics $billions 45 40 35 30 25 20 15 10 5 0 1990 1994 1998 2002 2006 Source: Regent Atlantic Capital 2007 42 BIOTECHNOLOGY HEALTHCARE · JULY/AUGUST 2008

Table of Contents Feed for the Digital Edition of Biotechnology Healthcare - July/August 2008

Biotechnology Healthcare - July/August 2008 Openers Contents Editorial/David B. Nash, MD, MBA Drug Track Health Plan Confidential Rheumatoid Arthritis A Decade of Trial, Error, False Starts, and Hope What Path Will Comparative Effectiveness Research Take? RA Therapies in Development: A New Generation of Relief Assessing the Full Impact of RA on Employers and Payers Stem Cells: Health Insurance You Can Bank On Specialty Pharmacy Employer to Employer Personalized Medicine Trends Clinical Briefs

Biotechnology Healthcare - July/August 2008

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